George Osborne’s autumn statement will reveal the distribution of pain and how it will continue to the end of the decade. Photograph: Goh Chai Hin/AFP/Getty Images

Things will only get worse as the Conservatives cut yet more services. The public sector needs to fight back

There was once a Conservative tradition that honoured public service – no more. When David Cameron talks of endless austerity in the service of creating a smaller state, no longer instrumentally to reduce the deficit but as a matter of belief, he speaks for the new centre of gravity in his party. If you run a school, local authority, prison, hospital or police force, the Conservatives are your sworn enemy. It is not just that they cut your current and capital spending by a degree unknown for a century, they do so with relish. You are the obstacles to wealth creation and freedom, who crowd out the virtuous private sector: you are the representatives of bureaucracy and the state. You are held in contempt.

Many of the readers of this column may think it can’t get worse: the cumulative cuts in capital and current spending already constitute around £25bn. Much of the strain in many parts of the public sector has been taken by wages and salaries in effect being frozen along with more than 300,000 job losses, although in areas like local government or policing, where the assault has been more draconian, services have had to be scaled back. But you ain’t seen nothing yet.

While the chancellor, George Osborne, will in Thursday’s autumn statement reveal the distribution of the pain and how it will continue to the end of decade, over the next four years the Treasury has pencilled in a further £65bn of cuts in current spending across the entire public sector.

How to respond? The incantation is that you must get more from less – not easy from a workforce who face a never-ending fall in their living standards, few promotion prospects and the risk of losing their job. Estimates from the Institute of Fiscal Studies suggest another 900,000 job losses are likely by 2017/18.

The fashionable option is to suggest that you contract out to a Serco, Capita or G4S, the momentum unstoppable despite the spate of recent scandals. While it is good to make the provision of public services contestable – and to have some new ideas and benchmarks for how to organise things – that is not what is now happening.

As contracting out has become industrialised what it means in practice is turning over of swaths of public services to providers who by their own admission have lost their moral compass – and who only achieve “more for less” by cutting corners, misbilling, downgrading the service or dramatically weakening the terms and conditions of employment. It is a monumental scam.

These are dark days, and they are set to become darker. I wish the public sector would go on the offensive, and openly embrace notions like the “earnback” I proposed in my review of senior pay. It is a way leaders can signal they are prepared to put their own pay at risk if they did not do a good job and regain the moral high ground. It is also a signal to staff that whatever their pain, you are also suffering. Together, with backs against the wall, there may be processes or procedures that can be re-engineered before they are contracted out.

The long-term solution is a recognition by society, business and our political leaders that public activity is not a mark of Cain, but a crucial part of the economic and social landscape. There is an interdependence between public and private; to adapt the famous Chinese proverb, they both hold up the sky. Indeed, it is scarcely credible that by 2017/18, 85% of the planned reduction in the deficit will have been assumed by spending cuts rather than tax increases. It is time to argue back. The Conservative party needs to rediscover its lost tradition.

Will Hutton is principal of Hertford College, Oxford, chair of the Big Innovation Centre, an Observer columnist and he led the Fair Pay Review in 2010/11.